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Thursday, September 16, 2021
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Are Constitutionally Excessive Punitive Damages Headed Back To The Supreme Court? Let’s Hope So.

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The Supreme Court has repeatedly struck down excessive punitive damages awards as arbitrary deprivations of property without due process of law.

In State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 429 (2003), the Court struck down a $145 million punitive damages award as “an irrational and arbitrary deprivation of the property of the defendant.” In Philip Morris USA v. Williams, 549 U.S. 346, 352-55 (2007), the Court struck down a $79.5 million punitive damages award because it arbitrarily punished the defendant for its conduct toward non-parties.

In particular, State Farm cautioned that “[w]hen compensatory damages are substantial,” a “lesser ratio” of punitive to compensatory damages, perhaps only 1 to 1, can satisfy “the outermost limit of the due process guarantee.” 538 U.S. at 425. So in Exxon Shipping Co. v. Baker, 554 U.S. 471, 514 (2008), the Court reduced the punitive damages award to match the compensatory award of $500 million.

Yet more than a decade has passed since the Supreme Court last addressed the issue of constitutionally excessive punitive damages. Since then, the due process defects identified by the Court—such as a lack of fairness, a lack of consistency, and cumulative punishment—have only increased in severity. These changes are fueled by an increase in the size of mass tort actions, coupled with many courts’ reluctance to rein in constitutionally excessive punitive damages awards. Indeed, many circuit and state courts have all but ignored the Court’s admonition that, when the compensatory damages award is “substantial,” the punitive damages award should be no greater.

Hopefully, that may all be about to change. A cert petition in Johnson & Johnson v. Ingham offers the Court an attractive vehicle for resolving the disparity among the lower courts and for reining in constitutionally excessive punitive damages. (WLF filed one of nine amicus briefs urging the Court to grant review).

The case arises from a Missouri Court of Appeals decision affirming a $2.2 billion verdict against Johnson & Johnson. This is the so-called “Talc-powder case.” J&J has sold baby powder and shower talc to generations of Americans, and those products have been found safe by both the Food and Drug Administration and the National Cancer Institute. Even so, plaintiffs’ lawyers have brought nationwide suits alleging that the presence of microscopic asbestos fibers in J&J’s talc can cause ovarian cancer.

In this case, 22 women from across the country, who allege they had both used J&J’s products and developed ovarian cancer, brought a tort suit against J&J in St. Louis City Circuit Court, a notorious judicial hellhole. Although the scientific support for causation was flimsy at best, plaintiffs’ counsel repeatedly urged the jury to infer from the mere presence of 22 ovarian-cancer patients who had used J&J’s products that those products caused the plaintiffs’ cancer.

The jury obliged. It returned identical verdicts of $25 million in compensatory damages for each plaintiff, along with an eye-popping $4.14 billion in punitive damages—eleven times the amount of compensatory damages. One juror later explained that the punitive damages award was meant to divest J&J of all its profits from talc sales nationwide for the past 40 years.

But there are over 25,000 plaintiffs left in the world with active lawsuits against J&J for the same alleged misconduct. And there is nothing to stop them from imploring a jury to award punitive damages of a similarly global scope. This danger is hardly unique to this case; it is a constant threat whenever a subset of plaintiffs seeks punitive damages for far-reaching or long-running conduct allegedly affecting hundreds or thousands of persons not before the court. This is a recurring pattern in the ever-expanding world of mass torts.

Nor is it simply J&J’s rights that are harmed. Constitutionally excessive punitive damages awards reduce the pool of funds available for plaintiffs who have yet to see their day in court. This creates a “tragedy of the commons,” by which early plaintiffs are incentivized to consume a defendant’s limited resources immediately, maximizing their own recovery, but depleting the resources available to compensate future plaintiffs. Yet the Due Process Clause does not permit a few early plaintiffs to obtain not only full compensation for their injures but also a windfall in punitive damages—at the expense of a far greater number of similarly situated plaintiffs who have not yet secured relief.

To address these constitutional and public-policy concerns, and to provide much-needed clarity to the lower courts, the Supreme Court should grant review and impose a 1 to 1 cap on the ratio of punitive to compensatory damages when compensatory damages are substantial. Such a rule would both prevent defendants from being punished repeatedly for the same conduct and ensure greater fairness in recovery across large groups of plaintiffs.

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